NEW DELHI: SKS Ispat & Power, linked to tourism minister Subodh Kant Sahai, and Bhushan Steel have challenged the de-allocation of their coal blocks in the Delhi High Court, even before they received any formal communication about cancellation.

Coal blocks were de-allocated after an inter-ministerial group (IMG) reviewed the progress of work in the blocks and recommended action after hearing the response of the companies that were issued notices.

Bhushan Steel was the first to approach the court, followed by SKS Ispat, according to government sources. "The court has asked both companies to wait for de-allocation letters from the coal ministry before filing cases," said a government official.

A senior coal ministry official said the government expects more companies to follow suit once de-allocation letters are issued to them. The government is likely to cancel the allocations of 13 coal blocks affecting 28 private companies, based on the IMG's recommendations.

The coal ministry has not yet decided on the procedure to re-allocate the 13 blocks, with 2,609 million tonnes (MT) of reserves, as it expects several companies to take legal action.

On September 15, the IMG had recommended cancellation of licences for the New Patrapara coal block in Odisha given to eight companies led by Bhushan Steel and the Rawanwara North block in Madhya Pradesh allocated to SKS Ispat & Power.

The IMG - headed by a coal ministry official and with members from the finance, law and power ministries - decided to cancel the two blocks with combined reserves of 1,200 MT citing non-achievement of milestones. The coal ministry had cancelled the blocks last Monday.

Bhushan Steel faced de-allocation as it did not commence coal production from the New Patrapara block given in 2006.

However, sources close to Bhushan Steel said the company has made heavy investments in operating its sponge iron project for which coal was being imported.

"The fact that the end-use project was operational was confirmed by the steel ministry but the IMG was of the view that the company did not make serious efforts in mining coal from a possible sub-block," said the coal ministry official.

As per terms of the allotment, Bhushan Steel was required to mine coal and transfer shares of other allottees through Mahanadi Coalfields.

In its recent show cause notice, the coal ministry had said that important milestones such as forest clearance, mining lease and land acquisition were pending for the New Patrapara block since there were issues among the block owners.

According to the IMG, SKS Ispat - that was in the news for its connection with tourism minister Sahai's brother - invested just 55 crore in purchasing geological reports from Coal India's technical arm Central Mine Planning & Design Institute (CMPDIL).

The IMG facts are based on presentations made by companies on progress of the blocks and their associated projects. Sources close to the company said it claims to have invested about Rs 1,400 crore in an associated sponge iron plant in Raipur, Chhattisgarh that is reportedly operational.